Market Vectors Launches CNXT

New fund to provide targeted exposure to independent companies driving China’s growth; ChinaAMC partnership allows direct investment in Ashares….  

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Market Vectors ETF Trust has launched the Market Vectors ChinaAMC SMEOChiNext ETF (NYSE Arca: CNXT), a new fund which seeks to provide exposure primarily to China’s market of innovative, nonOgovernment owned companies, it was announced today. Through a partnership with ChinaAMC, the fund will invest directly in China AOShares.
CNXT seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the SMEOChiNext 100 Index. This index is intended to track the performance of the 100 largest and most liquid stocks listed and trading on the Small and Medium Enterprise (SME) Board and the ChiNext Board of the Shenzhen Stock Exchange (SZSE).
Often viewed as mainland China’s NASDAQ, the SME Board was established in 2004 under SZSE and acts as an exchange platform for mainly mature or maturing smallO and mediumOsized companies in China. The ChiNext Board, a whollyOowned but independent arm of SZSE, began trading operations in 2009 and has focused primarily on startOups and growth companies. As of June 30, 2014, a total of 720 companies were listed on the SME Board with a combined market value of $648.58 billion, while 381 companies traded on the ChiNext Board with a combined market value of $298.42 billion1

ChinaAMC is currently China’s largest asset manager in terms of fund assets under management and will serve as subOadvisor to CNXT using a Renminbi Qualified Foreign Institutional Investor (RQFII) quota that it has received to invest in China AOshares. This marks  the second ETF for which Market Vectors and ChinaAMC have partnered in this way, joining Market Vectors ChinaAMC AOShare ETF (NYSE Arca: PEK).   

“We’re very excited to bring a unique vehicle like CNXT to market as part of our growing relationship with ChinaAMC,” said Amrita Bagaria, ETF Product Manager with Market Vectors. “The Chinese government appears to recognize that small, nonOgovernment backed firms often struggle to access capital because large banks generally do not offer them financing2.  As such, the SME and ChiNext Boards were established to help promote private innovation in the public markets3, and this new fund gives investors a liquid, transparent way to gain access to some of these growing companies.”   

Bagaria added that at the start of 2014, SMEs in China were contributing 60% of the country’s GDP, 80% of its employment, and 74% of its technological innovation, according to the World Trade Organization. “The information technology, consumer discretionary and staples, and health care sectors are driving what has been called China’s ‘New Economy’,” said Bagaria.  “They are among the top sectors represented in the underlying index for CNXT.”
 
Market Vectors notes that investing in Chinese securities, particularly AOshares, comes with associated risks, which include adviser and subOadviser risk, risk of the RQFII regime, political and economic instability, inflation, confiscatory taxation, nationalization, expropriation, and market volatility. In addition, the Fund is subject to risks associated with foreign and emerging markets investments including liquidity, valuation, currency, and nonOdiversification, among other risks. Companies with mediumO and smallerOcapitalizations are also subject to elevated risks.
CNXT has a gross and net expense ratio of 0.68 percent.  

1 Shenzhen Stock Exchange
2 “China’s Central Bank to Expand Loans to Small Businesses.” Wall Street Journal, 26 July 2013. Web.
<http://online.wsj.com/news/articles/SB10001424127887324110404578628904026769958>.
3 “About ChiNext.” Shenzhen Stock Exchange, 2013. Web. <http://www.szse.cn/main/en/ChiNext/aboutchinext/>.

Source: ETFWorld.com